Deal struck in airport bid-rigging

Contractors say jobs required joining kickback scheme

Two contractors who admitted to paying kickbacks to a state airport official in exchange for contracts at Honolulu airport will not spend any time in jail, after agreeing to testify for the government in one of the biggest procurement-corruption cases in state history.

Roy Shimotsukasa, 68, of AAA Termite, and Herbert Hirota, 54, of Hirota Painting Co., pleaded guilty to first- degree theft in early 2004 for their roles in a $2 million bid-rigging scandal.

As part of the plea, both will have to repay the state.

The prosecution resulted from a joint federal-state investigation begun more than six years ago by the state attorney general after airport auditors learned the state had been billed $14,000 for the construction of four 6-foot-long plywood planter boxes to hold poinsettias during the holidays.

The investigation uncovered a practice where contractors, at the behest of an airport official, were submitting "complementary" bids along with their bids to get contracts, kicking back money to the official to continue getting work and inflating their bids to cover the cost of the kickbacks.

"The sad thing about this case is that the airport had work crews that could have done a lot of the work," said Deputy Attorney General Chris Young. "And so we had work crews not doing any work and getting paid anyway, and we're paying these contractors for work not being completed. In times of a tight economy when this occurred, in early 2000, it's inexcusable."

Circuit Judge Richard Perkins noted yesterday that the defendants' cooperation with the government and payment of restitution had been an important factor in the sentences imposed. Shimotsukasa repaid the state $75,000 prior to sentencing. Hirota has agreed to pay back $25,000 at $2,000 a month.

Because of their cooperation, Young asked that each serve a five-year term of probation and perform 200 hours of community service instead of jail.

Both defendants had sought a deferral of their guilty pleas based on their assistance to the state and federal investigation. Both had testified at the federal trial in October that resulted in the convictions of former airport officials Dennis Hirokawa and Richard Okada for conspiracy and mail fraud. Hirokawa and Okada await sentencing.

The court granted Hirota's request for a deferral, but denied Shimotsukasa's request after Perkins found him ineligible because of a felony conviction for burglary in 1958 for which he had received a deferral.

Both will be under court supervision for the next five years and must perform 100 hours of community service.

Attorney James Koshiba, who represented Shimotsukasa, said his client and Shimotsukasa's pesticide/termite company had established an excellent reputation in the community and even had served as a pesticide consultant to the Department of Health.

Shimotsukasa had been doing good work at the airport since 1995 when airport maintenance supervisor Dennis Hirokawa approached him in 2002 and told him he would have to play by their rules if he wanted to continue getting jobs, Young said. "Contractors were told that they needed to basically provide kickbacks in order to get contracts in the state. And these contractors were willing participants in the scheme."

Hirokawa told Shimotsukasa that he would have to submit with his bid two "complementary higher bids" and pay either $500 or $1,000, depending on the amount of the contract, Koshiba said.

At the time, AAA Termite was in dire financial straits, particularly because their warehouse had been destroyed by fire. When told to inflate the amount of the contract, Shimotsukasa did as he was asked, Koshiba said.

"He admits he knew it was wrong, but if he didn't do it, he wouldn't get jobs with the state," he said.

Koshiba defended Shimotsukasa's work, noting that he actually performed the work at every job he was hired to do.

But Young said the bottom line is that the contractors could have reported the scheme, but didn't.

"They could have not participated, they had options, but they decided to take the option of participating in an illegal scheme."

Attorney Ray Okuma, who represented Hirota, said the charges against his client had affected his personal and professional life for the past four years, and asked the court to consider that period "as time served."

In his plea agreement, Hirota said Hirokawa approached him in 1997 to submit competing bids along with his bid, and was thus guaranteed to be awarded the contract. "I knew that ... I would be the winning bidder because the system Hirokawa operated ensured that I would always have the lowest bid," he said.

Sometime after he had participated in the bid-rigging, Hirota was approached by Hirokawa for "donations," and complied "because I was afraid that not giving the money to Hirokawa would have dire consequences for my company continuing to work at the airport," he said in the plea agreement.

Young said he hopes the message has been sent that the attorney general takes seriously any allegations or subsequent findings of theft occurring within the state. "I can't say that it's not still going on -- I hope it's not -- but if we're made aware of it, we will totally investigate it and prosecute it if its prosecutable."

Four contractors who also pleaded guilty to the scheme await sentencing in state court.